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GREAT NEWS for Our Industry!
U.S. SUPREME COURT RELEASES RULING
IN SEILA LAW, LLC VS. CFPB
Today the U.S. Supreme Court announced its decision in Seila Law, LLC vs. CFPB, a case in which a private party challenged the issuance by the Consumer Financial Protection Bureau (CFPB) of a Civil Investigative Demand (CID) on the basis that the structure of the CFPB, as created by Congress in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) violates the Constitution’s separation of powers principle.
Seila Law argued that the CFPB’s structure is unconstitutional because the CFPB Director is removable only “for cause” and not at the will of the president. In issuing its ruling today, the Supreme Court agreed with Seila Law. It held that the structure of the CFPB is unconstitutional to the extent that the position of CFPB Director could not be removed other than for cause.
Further, the Supreme Court determined that Dodd-Frank’s provision that addressed the removal of the Director was severable from the balance of the Act. Finally, the Court ruled that upon striking this provision, the Director of the CFPB may now be removed by the president at will, but that the balance of the Act may stand. A pertinent excerpt of the Court’s ruling is here:
The President’s power to remove—and thus supervise— those who wield executive power on his behalf follows from the text of Article II, was settled by the First Congress and was confirmed in the landmark decision Myers v. United States, 272 U. S. 52 (1926). Our precedents have recognized only two exceptions to the President’s unrestricted removal power. In Humphrey’s Executor v. United States, 295 U. S. 602 (1935), we held that Congress could create expert agencies led by a group of principal officers removable by the President only for good cause.
Such an agency lacks a foundation in historical practice and clashes with constitutional structure by concentrating power in a unilateral actor insulated from Presidential control. We, therefore, hold that the structure of the CFPB violates the separation of powers. We go on to hold that the CFPB Director’s removal protection is severable from the other statutory provisions bearing on the CFPB’s authority. The agency may, therefore, continue to operate, but its Director, in light of our decision, must be removable by the President at will.
The full opinion is here: https://www.supremecourt.gov/
Today’s decision ends a multi-year challenge to the Dodd-Frank Act, and it has significant implications for Congress in that it changes the ability of the legislative branch to delegate certain executive branch functions.
It also impacts the way the executive branch controls independent agencies.
Most immediately, the decision has significant impacts on the CFPB and its current Director, Kathleen Kraninger, who was confirmed to the post in December of 2018, for a five-year term.
For our industry, today’s ruling may have an impact on the Small-Dollar Rule, which was initially promulgated in 2017, and for which the CFPB has proposed significant revisions. The revisions were anticipated in April of this year but have not yet been issued.
>We will be providing additional analysis with respect to today’s decision and its impact on our industry.